How This 25-Year-Old Paid Off ₹10 Lakh Debt in Just 1 Year—Her Secret Strategy

At 24, Chitra found herself staring at a ₹10,00,000 debt. The weight of multiple loans and credit card bills seemed insurmountable. In India, household debt has been on the rise, reaching 42.9% of the GDP as of June 2024, primarily due to an increase in the number of borrowers.

Chitra refused to let debt control her life. With careful planning and financial discipline, she successfully paid off ₹10,00,000 in just one year. Her story highlights practical strategies for managing debt and building long-term financial stability.

Understanding the Full Debt Picture

Chitra never thought she would be in deep debt. But when she finally checked her bank statements and credit card bills, she was shocked, ₹10,00,000 in total debt! It was a mix of student loans, credit card bills, and a personal loan.

At first, she ignored it, hoping it would go away. But the interest kept increasing. One day, she received a call from the bank about a missed payment. That was her wake-up call.

She took a notebook and wrote down all her debts, including:

• ₹4,00,000 student loan (interest rate: 9%)
• ₹3,00,000 credit card bill (interest rate: 36%)
• ₹3,00,000 personal loan (interest rate: 14%)

Total monthly EMI: ₹28,000.

She realised that most of her money was going towards interest, and if she did not act fast, she would pay much more in the long run.

Creating a Bulletproof Budget to Maximise Savings

Now that she knew her complete debt picture, she needed a plan. The first step? A solid budget. She followed a simple rule: the 50/30/20 method.

• 50% for needs: rent, food, transport
• 30% for wants: movies, shopping, eating out
• 20% for savings & debt repayment

But her debt was huge, so she modified it:

• 40% for needs (₹20,000)
• 10% for wants (₹5,000)
• 50% for debt repayment (₹25,000)

She also tracked every rupee using a free mobile app. Whenever she spent money, she logged it. This helped her understand where her money was going.

At the end of the first month, she saw a clear pattern; she spent a lot on food delivery and shopping. That had to change.

Slashing Unnecessary Expenses Without Feeling Deprived

Cutting expenses doesn’t mean living a boring life. Chitra made wise choices to save money without feeling miserable.

1. Cooking Instead of Ordering

• Earlier: ₹5,000 per month on Zomato/Swiggy
• Now: ₹1,500 by cooking simple meals

She started cooking easy one-pot meals like khichdi, pulao, and sandwiches. She also meal-prepped on Sundays to save time.

2. No More Impulse Shopping

• Earlier: ₹3,000 per month on online shopping
• Now: ₹500 (only for necessary items)

She followed the "24-hour rule”; if she wanted to buy something, she had to wait a day before purchasing it. Most times, she realised she didn’t need it.

3. Smart Travel Choices

• Earlier: ₹4,000 per month on cabs
• Now: ₹1,500 by using metro & bus

She stopped taking cabs for short distances and switched to metros and buses. She also walked more, which was good for her health!

Her Monthly Expense Reduction Plan

She used all these savings to pay off extra debt every month.

Boosting Income

Apart from cutting costs, she also increased her income. She picked up two side gigs:

1. Freelance Content Writing: ₹8,000/month
2. Online Tutoring (Maths for school kids): ₹5,000/month

That was an extra ₹13,000 per month! She put all of it towards her highest-interest debt, her credit card bill.

How She Cleared ₹10 Lakh Debt in 1 Year

1. Paid high-interest debt first: She focused on her credit card bill first (36% interest).
2. Made more than minimum payments: She paid extra monthly, reducing total interest.
3. Used every bonus or gift wisely: Any extra money went to debt, not shopping.

Within 12 months, she was debt-free. No more bank calls, no more sleepless nights. Just peace of mind.

What Are Side Hustles? Earning Beyond The 9-To-5

Chitra realised that just cutting expenses was not enough. She needed to earn more to clear her ₹10,00,000 debt faster. But with a full-time job, finding extra income seemed difficult. That’s when she discovered side hustles, small jobs she could do after work or on weekends.

At first, she started freelance content writing and earned ₹8,000 per month. Soon, she also began online tutoring for school kids, making another ₹5,000 per month. In total, her extra income was ₹13,000 per month.

Let’s break down how her extra earnings helped her debt payments:

She used every rupee from her side hustles to pay off her highest-interest debts. By the end of the year, she had reduced her debt by ₹1.5 lakh just from extra income.

How You Can Start a Side Hustle

1. Identify your skills: Are you good at writing, teaching, designing, or coding?
2. Find online platforms: Websites like Fiverr, Upwork, and Chegg help you find freelance jobs.
3. Use weekends wisely: Spend 2-3 hours daily to build a steady income.

Even an extra ₹5,000 per month can speed up debt repayment and help you become financially free faster.

Using the Debt Snowball vs. Avalanche Method Strategically

Once Chitra had extra income, she needed the right strategy to pay off her debt. There were two popular methods:

1. Debt Snowball Method: Pay off the smallest loan first, then move to the next one.
2. Debt Avalanche Method: Pay off the highest-interest loan first to save money on interest.

Chitra had three debts:

• ₹4,00,000 student loan (9% interest)
• ₹3,00,000 credit card bill (36% interest)
• ₹3,00,000 personal loan (14% interest)

She chose the Avalanche Method because her credit card had the highest interest (36%).

Debt Repayment Plan with Avalanche Method

With her monthly salary, side hustle income, and savings, she paid ₹40,000 per month towards her credit card. In just 7 months, she cleared the credit card debt. Then she moved to her loan and finally her student loan.

Why Avalanche Method Worked for Chitra

• She saved money on interest by clearing high-interest debt first.
• Her total interest payments reduced, meaning she could clear all loans faster.

If your biggest problem is high interest, the Avalanche Method is better. But if you need motivation, Debt Snowball works because small wins keep you going.

Negotiating Lower Interest Rates and Better Repayment Terms

Chitra learned that banks and lenders can be flexible if you talk to them. Many people just accept high interest rates without asking for a better deal. But she decided to negotiate.

She called her bank and asked for a lower interest rate on her loan. She mentioned her good payment history and that she was struggling with high EMIs. After some discussion, the bank reduced her interest from 14% to 11%.

How Negotiation Helped Chitra Save Money

She switched to a balance transfer option for her credit card, moving her balance to a different bank with a lower interest rate of 18% instead of 36%. This helped her cut her interest payments by half.

How You Can Negotiate Lower Rates

1. Check your credit score: A good credit score (750+) gives you better deals.
2. Call your lender: Ask if they can reduce the interest rate based on your history.
3. Explore balance transfer: Move loans to a bank with lower rates to save money.

Even a tiny 2-3% reduction in interest can save thousands of rupees over time. Always ask!

Monetising Hobbies: Turning Passion into Profit

Chitra always loved writing but never thought she could earn from it. She used to write small stories and poems for fun. One day, while looking for extra money, she found a website that paid for freelance writing. She applied, got her first project, and earned ₹500 for a short article.

Excited by this, she took it seriously. She started writing for different clients and increased her earnings to ₹8,000 per month in just three months.

She also enjoyed maths and had helped her younger cousin with studies before. She listed herself as an online tutor on a platform and soon had three students. Each paid her ₹2,000 per month, adding ₹6,000 to her income.

Total Extra Income from Hobbies

• Freelance Writing: ₹8,000/month
• Online Tutoring: ₹6,000/month
• Total: ₹14,000/month

She used this money to pay off her debt faster. Instead of just making minimum payments, she paid extra towards her loans. This helped her clear her high-interest credit card debt within 6 months instead of dragging it for years.

Automating Savings and Debt Repayments to Stay on Track

Handling money manually was tough for Chitra. Sometimes, she would forget to transfer money to her savings, and other times, she would spend extra on shopping. She realised that if she didn’t automate her finances, she might fall back into debt.

She set up three automatic transfers:

1. Debt Repayment: ₹25,000 auto-debited every month towards her loans.
2. Emergency Fund: ₹5,000 transferred to a savings account.
3. Investments: ₹3,000 in mutual funds (SIP).

By setting up these automatic payments, she never had to worry about missing a loan payment or overspending.

Before vs. After Automating Finances

Because her savings and debt payments happened automatically, she only spent what was left in her account. This kept her disciplined and helped her clear her ₹10 lakh debt in just 1 year.

Conclusion 

Chitra’s story shows that paying off significant debt is possible with the right plan. She did not use shortcuts or wait for a miracle. Instead, she faced her financial problems, budgeted, reduced extra spending, and found ways to earn more. 

She proved that small changes, like cooking at home, using public transport, and avoiding impulse shopping, can make a big difference. Her journey was not easy, but she stayed disciplined and focused. 

Now, she enjoys a life free from debt stress. If you are struggling with debt, start today. A few smart steps can lead to financial freedom.

FAQs

1. How did Chitra pay off ₹10 lakh debt in just one year?
She used the Debt Avalanche Method, cut unnecessary expenses, earned extra money through side jobs, and automated her debt payments.

2. What is the best way to clear debt faster?
Prioritise high-interest loans first, reduce spending, increase income with a side hustle, and make extra payments whenever possible.

3. How can I reduce my loan’s interest rate?
Call your bank to negotiate a lower rate, check if a balance transfer option is available, and maintain a good credit score for better offers.

4. How can I earn extra money to pay off debt?
Look for side hustles like freelancing, tutoring, or selling handmade products. Even earning ₹5,000 extra per month can speed up debt repayment.

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LoansJagat Team

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